Question

Tata Motors’ purchase of iconic British luxury car maker Jaguar Land Rover ($ 2.3 billion) has proved to be a master stroke.

State whether the above transaction will be recorded under the Debit side or the Credit side of Balance of Payments. Give a reason.

Answer 1

Tata Motors’ purchase of Jaguar Land Rover (JLR) for $ 2.3 billion will be recorded on the debit side of India’s Balance of Payments (BoP).

Reason:

This transaction represents an outflow of foreign exchange from India to the UK, as Tata Motors is making a payment to acquire a foreign company. Such capital outflows are recorded as debits in the BoP’s Capital Account.